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socrateaser, Attorney

Category: Bankruptcy Law

Satisfied Customers: 35214

Experience: Attorney and Real Estate Broker -- Retired (mostly)

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CITY OF VALLEJO IS IN BANKRUPTCY AND ON JUNE 29TH WILL BE IN

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CITY OF VALLEJO IS IN BANKRUPTCY AND ON JUNE 29TH WILL BE IN FEDERAL COURT ATTEMPTING TO TAKE AWAY OUR HEALTH BENIFITS WHICH ARE FULLY PAID AT THIS TIME. APPARENTLY OUR DEPARTMENT (POLICE) DID NOT HAVE A WRITTEN AGREEMENT WITH THE CITY TO CONTINUE BENIFITS FOR RETIREES. WE NOW ARE TOLD TO RESPOND TO THE COURT IN WRITING AND OR IN PERSON AND CHALLENGE THE CITIES CALCULATION OF OUR HEALTH BENEFITS CLAIM WHICH WAS FILED PREVIOUSLY WITH THE COURT. QUESTION....HOW WOULD YOU RESPOND TO THE COURT. MERCY,KICK AND SCREAM,PLEAD,ETC, ETC....WE HAVE NO CASE LAW OR PRECEDENTS TO PRESENT IN OUR ARGUMENT. WE COULD MAYBE CITE OTHER DEPARTMENTS WITH SIMILAR CONTRACTS THAT ARE STILL PAYING THEIR RETIREES BENIFITS BUT THAT WOULD TAKE TO MUCH TIME TO RESEARCH. I THOUGHT IT WOULD BE BETTER TO PRESENT AN OFFICIAL OR SEMI-OFFICIAL LOOKING FORM TO THE COURT, BUT HAVEN'T FOUND ANY ON THE INTERNET YET. WE HAVE OVER 100 RETIREES AFFECTED. NO BODY SEEMS TO KNOW HOW TO RESPOND, SO I AM ASKING FOR SOME ADVICE, SO I CAN PASS ON THE INFO....THANKS RON

A DIP cannot modify or terminate a CBA without following a detailed Code procedure. See 11 USCA § 1113.

The fact that a collective bargaining agreement (CBA) requires the debtor in possession (DIP) to maintain specific benefits (wages and retirement benefits, etc.) may be used as a rationale for authorizing continued payment of the benefits postpetition. See In re Arlene's Sportswear, Inc. (BC D MA 1992) 140 B.R. 25, 26-28--permitting postpetition payments to holiday trust fund as required by CBA; Adventure Resources, Inc. v. Holland (4th Cir. 1998) 137 F.3d 786, 795-796--debtor must honor all terms of CBA until properly rejected; but see In re Moline Corp. (BC ND IL 1992) 144 B.R. 75, 77-80--motion to compel debtor to pay prepetition medical benefits and vacation pay under CBA denied (DIP not obligated to make such payments unless and until CBA assumed in bankruptcy).

Now, if the CBA does not require the maintenance of such payments, or the DIP/City rejects the entire collective bargaining agreement, then you have a big problem, because the City doesn't have to do something that was never agreed to at all. The absence of the required health care payments in the CBA could be grounds to sue the union leaders for breach of loyalty, and/or the attorneys who drafted the CBA for malpractice -- but, ultimately, the cost of health care is probably so great than no one other than Uncle Sam could prop up any entity that was successfully sued to cover retirement health care fees.

The CBA itself cannot be rejected in bankruptcy, except on a showing of necessity after balancing the equities of the parties. But, it can be rejected, terminated or modified by the court -- so, some sort of settlement is highly likely, due to the very costly litigation expenses of fighting this sort of issue.

But, again, if the CBA flatly does not require maintaining health care, then there is nothing to stop the City as DIP from ceasing its payments -- and, in fact, it really has little choice, because the alternative would be to provide one unsecured credit inequitable treatment which also violates the bankruptcy code.

Note: You cannot reasonably expect to be able to make a credible defense in bankruptcy court against an adversary like the City, without a competent lawyer. So, I hope you are one, or you intend to get one in a hurry, because this is simply way too big a deal to try to "do-it-yourself."

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HEY, I EVEN GOT SOME CASE LAW THROWN AT ME, GREAT. YOU DID GREAT. I WILL RESEARCH THE CASES. NOW AS I UNDERSTAND YOU...THE POLICE ASSOCIATION (CBA) SHOULD BE REQUIRING THE CITY TO MAINTAIN THE THE BENIFITS, RIGHT? I DON'T THINK THAY ARE DOING THAT. ALL I KNOW IS THE CBA HAS ALREADY AGREED TO REDUCE NEW AND PRESENT OFFICERS BENIFITS. THE RETIREES HAVE A RECENTLY ESTABLISHED GROUP. THE CBA NO LONGER REPRESENTS US SO WE ARE KIND OF LEFT OUT. AT ANY RATE I GUESS WE WILL LOSE OUR BENIFITS IN BANKRUPTCY AND HOPE WE CAN DO SOMETHING AFTER THE GET OUT OF IT. THANKS FOR THE INFO, IF YOU HEAR OF FIND ANY OTHER CASE LAW, I WOULD APPRECIATE THE INFO.

The union has a legal obligation to assert its members rights -- including the retired members. The bankruptcy code has strict rules concerning the modification, termination and rejection of an existing union contract. There are numerous ways to fight over the health care issue, but ultimately it comes down to whether or not there is a settlement, or the court determines that a fair resolution of the city's bankruptcy requires a draconian resolution of the health care issue, vis-a-vis something more moderate (perhaps a prorata reduction in benefits, rather than an outright cutoff). But, yes, the union should be fighting for member rights -- though the litigation could be costly. The question is: where does the cost offset the benefits maintained. I can't do this calculation, but it's a calculation that the union should be disclosing to the members, so that they know whether or not to push for a fight, or a settlement, or to just cave in.

I will tell you that...the things you have to go through to be an Expert are quite rigorous.

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